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Second Appeal Letter
PA ID# 037-91033-00; Los Angeles County University of Southern California Medical Center
DSR ID# 10922; Outpatient Hospital Building
February 17, 2010
Governor’s Authorized Representative
California Emergency Management Agency
Response and Recovery Division
3650 Schriever Avenue
Mather, California 95655
Re: Second Appeal–Los Angeles County University of Southern California Medical Center
PA ID 037-91033-00, Outpatient Hospital Building, FEMA-1008-DR-CA,
Damage Survey Report (DSR) 10922
Dear Mr. McCarton:
This is in response to your letter dated October 29, 2008, which transmitted the referenced second appeal on behalf of the Los Angeles County University of Southern California Medical
Center (Applicant). The Applicant is requesting that the Department of Homeland Security’s
Federal Emergency Management Agency (FEMA) reconsider its designation of construction administration costs for its outpatient hospital building as project management costs.
Following the Northridge earthquake on January 17, 1994, the Applicant accepted Grant Acceleration Program (GAP) funds to repair the facility. In accordance with GAP guidelines, FEMA determined at project closeout that $59,301 in architectural and engineering (A&E) construction administration costs constituted project management costs. The Applicant appealed FEMA’s determination on February 19, 2008. The Applicant argued that FEMA mischaracterized these costs as project management costs when the costs were directly related to construction design and engineering services (part A costs). The total amount in dispute is $68,789 ($59,301 in part A costs plus $9,488, the 16 percent allowance for project management costs attributable to the increase in part A costs) that could be offset by underruns from another eligible GAP project. The Deputy Regional Administrator sustained this decision on first appeal in a letter dated July 29, 2008.
The Applicant submitted its second appeal on August 29, 2008. The Applicant maintained that the $68,789 in costs should not be categorized as project management costs, but treated as eligible part A costs associated with the design and engineering of the project. The Applicant included a copy of the A&E Services Agreement and a Subgrantee Summary of Expenditures, A&E Construction Administration. The summary of expenditures lists categories of work with corresponding vendor names, job invoice numbers and service fees. However, the Applicant did not provide vendor invoices that identify the specific A&E services performed and the fees associated with those services to support its claim.
The approved GAP funding for the University of Southern California Medical Center contained a limit on project management costs (soft costs). In 1999, FEMA approved construction administration as a project management cost in the GAP settlement offer pursuant to the Northridge GAP Cost Estimating Format (CEF) Guide. In 2000, FEMA and Los Angeles County agreed to caps on the County’s claims for project management costs because FEMA determined the County’s initial claims for project management costs were excessive. FEMA did not place caps on construction costs (hard costs). For the University of Southern California Medical Center project, the Applicant exceeded the approved project management costs and claimed construction administration costs as hard costs at closeout. However, the Applicant did not submit a description of the specific tasks performed under the A&E construction administration that would justify their treatment as hard costs. In absence of documentation that the construction administration costs were hard costs, it is appropriate, and consistent with the GAP CEF Guide, to treat these costs as project management costs. It is also appropriate to address these costs during closeout in the same manner they were treated in the GAP settlement offer. Therefore, FEMA considers the $59,301 in construction administration costs to be excess project management costs. These costs are not eligible for reimbursement.
I have reviewed all information submitted with the second appeal and have determined that questioned costs are appropriately characterized as project management costs pursuant to GAP guidelines and the documentation submitted. Therefore, I am denying the second appeal.
Please inform the Applicant of my decision. This determination constitutes the final decision on this matter pursuant to 44 CFR §206.206, Appeals.
Elizabeth A. Zimmerman
Disaster Assistance Directorate
cc: Nancy Ward
FEMA Region IX